What's Your Number?

January 29, 2007

Tonight I would like to take a moment and recognize one of the best books I have read recently regarding the issues facing boomers in retirement. Lee Eisenberg's The Number focuses on our choices and dreams, not our investments and returns. Too often in planning, we focus on hard numbers produced in a vacuum without any understanding of what money means to us, or what we intend to do with it.

I have a link to the number to your right on my site, and I encourage you to look at his blog, buy the book, and most of all examine the issues brought up by the book. It is well worth taking the time early in your life to make decisions that could lead to a healthy and happy retirement. Sure, everyone wants a million dollars, but why do you want a million dollars, and how will it change your life? Will you still be the same person? What kind of person will you be? These are the issues and questions brought up by the author. This book is about money, but ultimately it's about the life you want, the life you don't, and the costs of each. The hardest hitting questions come at the end, and I will leave them for you to answer personally. I will however share with you my personal favorite.

You just found out that you have an incurable disease and have 24 hours to live. What did you not become?

The questions raised in this book are uncomfortable to ask ourselves, but if they are asked will lead to the most honest answers, because we cannot lie to ourselves. In the book, Lee talks about his fellow colleagues and how their number frequently changed throughout their careers. As they hit 100K, their number became 1 million. As they hit 1 million, it became 10 million. The point of the whole exercise is more self awareness rather than a specific financial goal.

So What's Your Number?

Something Wicked This Way Comes?

January 28, 2007

I write to you today as an Arctic cold front begins to grip the Midwest in it's clutches. Watching the news last night, the weatherman said it will be the coldest weather since 1994. I hope they are wrong. I don't know if my old Chevy Blazer can take such weather, and I'm pretty sure my old dogs can't. The unpredictability of weather leads me today to discuss the other great unknowable....the returns and in what order you will get those returns, on your investments in retirement. This is not a discussion about the merits of stocks or bonds, but rather, a discussion about the possible sequence of returns that you may receive from your various investments, and how withdrawals might affect your retirement savings. Like Mr. Cooger and the carousel in Ray Bradbury's "Something Wicked This Way Comes", we cannot ride backwards and reclaim lost time. We live in the here and now, and must make good decisions based on what we know now, or our decisions may spin the ride forward.

Now that you are near or in retirement, you will have to make a decision on where and how to invest your hard earned savings - a task made more difficult by the fact that your money will have to last for 20-40 years or more. It seems straightforward: invest in something that matches your risk tolerance with your time horizon to create a careful balance between asset growth and savings protection. What almost no advisor discusses with you is the impact of something that they have absolutely no control over - the sequence of returns you receive in retirement.To understand how important the pattern of returns is, imagine you average an 8% return for the last 25 years. An investment of $30,000 would have grown to $206,049 regardless of your sequence of returns in the accumulation stage. Now taking your $206,049 and beginning withdrawals based on 5% and increasing that amount 3% each year for inflation, the differences are stunning. With poor returns early in retirement, investor A runs out of money in 14 years, having withdrawn $167,334. Investor B who was luckier and retired during a period of great performance, was able to withdraw $375,619 over 25 years, and still have savings of $793,304. Surely I don't need to explain the importance of luck in your timing.

Here is a link to the Manulife site and the actual numbers
https://hermes.manulife.com/Canada/wmInvestmentsPub.nsf/public/GIFSelectIncomePlus_returns

The purpose of today's exercise is not to scare you out, or talk you into investing in the market. Most of your advisors are well meaning folks who do the best for you that they can. It is important though, to see the impact of luck as you enter your golden years, and keep in mind that we've had four straight years of positive performance in the stock markets. We've started this year positive for a fifth........

Something Wicked This Way Comes?

The First Entry - January 27, 2007

Hello Boomer Retirees!

This blog is my chance to share the wisdom that I have gleaned over the years, and to provide you with a one-stop shop for retirement advice and information. While the first posts may be more of a hello and get to know you, I hope you'll check back daily as I add links and posts that will be updated with new and exciting information. This site is not necessarily about investments, but occasionally I'll put up a chart or two if I think they are relevant.

I know from the many posts that I read that there is a general feeling of uneasiness about Social Security, and I will try to touch on the subject often, and at length. I just read a great article in the weekend (Monday) issue of Investors Business Daily that discusses a question that frequently comes up in the course of my work with retirees - "Should I begin taking benefits at 62, or wait until I'm 65?" The question comes up often, and frequently I didn't have a good answer. The article goes into some detail about the breakeven point of taking SS at 62 vs. 65, and goes a long way toward answering this often asked question. I hope you will read the article and give more thought to a question that many only ponder in passing.

In future posts I'll try to intelligently address issues such as longevity risk, and introduce you to some of my favorite books and articles regarding the subject. I'll provide links to my favorite websites and newsletters online, and update you on current issues. My hope, as I sit here after having put my own children to bed, is to provide you with the best possible site for retirement information on the Planet. It will take me some weeks to do this, and I ask for your help. Those of you that have a favorite, feel free to add a post and a link, and let the rest of us check it out. The idea is the site will become a clearing house for information regarding retirement issues, and I hope to get better with each blog entry.

A little about the Retirement Guy. I am 42 (I'll be 43 this Tuesday), have two children and a wonderful wife who let's me chase my hobbies without complaining, work in the Midwest, don't eat as well as I should, and discuss retirement issues with clients daily. This site is as much about my own concerns for retirement as it is about yours. I recently read statistics that show that as many as 43 percent of those working to age 65 will be at risk of being unable to maintain their standard of living in retirement. That is a stunning statistic, and everyone should take note no matter what the age. I make a decent living, but I too feel woefully unprepared for the end of my working days. I know I am not alone (this is discussed daily) and I hope that a simple blog-site can begin the process of lowering the afore mentioned statistic.

I am near the end of my first entry. I would like to put a link to one of the best books I have read recently, called The Number by Lee Eisenberg. It is an entertaining blogsite with audio and a link to purchase the book. Happy reading.....enjoy, and most of all.

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